Calm Before the Cuts? Dollar Consolidates, Euro Awaits ECB, and Pound Finds Its Floor.

  • USD: Limited data this week; focus shifts to housing market, tech earnings, and Trump’s AI push. Dollar likely remains rangebound.

  • EUR: ECB meeting and flash PMIs will guide direction. EUR/USD to consolidate around 1.1600 with no clear breakout catalyst.

  • GBP: Sterling stabilises after sharp drop; strong inflation and wage data reduce likelihood of three BoE cuts. PMI could support GBP.

  • Commodities: China’s new dam project boosts iron ore and steel; AUD and BRL benefit, while CAD may lag without a dovish BoC outlook.

  • Market Mood: With central banks on summer footing and no major shocks expected, FX majors are likely to trade in tight ranges this week.

USD: Markets Pause as Housing and Tech Step into the Spotlight
This week looks quieter for US data, with little fresh impetus for traders to shift their Federal Reserve expectations. Last week’s mild inflation data didn’t move markets much, with only minimal rate cut pricing for the Fed’s July and September meetings. Christopher Waller’s remarks in favour of a July cut caused a slight dip in short-term yields on Friday, but he’s still in the minority. ING maintains its view that the Fed could hold off until December for a 50bp cut.

Attention now turns to the housing market. Mortgage rates remain elevated, and concerns are growing that June’s existing and new home sales—due midweek—may show signs of strain. A $13bn 20-year Treasury auction on Wednesday will also provide insight into investor appetite amid these high yields.

Tech could also be in focus, with earnings from Alphabet, Tesla, and Intel on deck. Plus, Trump is expected to unveil his “win the AI race” strategy midweek, likely supporting big tech sentiment.

In the absence of major economic data, the dollar remains in consolidation mode. With short positions costly (over 4% funding), there’s little reason for a big USD drop. Expect DXY to stay within last week’s 97.70–98.95 range.

Elsewhere, commodity markets are reacting to China’s launch of a massive CNY1.2 trillion dam project in Tibet. This has lifted iron ore and steel prices, supporting exporters in Australia, Brazil, and South Africa. Meanwhile, the Canadian dollar may struggle unless the BoC’s Business Outlook Survey hints at more urgency for rate cuts later this year.

EUR: ECB Meeting and PMI Flash Readings in Focus
EUR/USD remains steady near 1.1600 after a period of consolidation, with no major catalysts for a breakout in sight. All eyes are on Thursday’s ECB meeting, though significant surprises are unlikely as President Lagarde heads into the summer break. However, any commentary on euro strength or EU tariff policies could sway sentiment.

Also due Thursday are the region’s flash PMIs for July. With numbers hovering around 50, analysts will be watching for signs of inventory depletion—an early indicator of potential restocking activity. On Friday, Germany’s Ifo business survey is expected to reflect continued optimism, largely driven by long-term infrastructure investments set for 2026.

EUR/USD seems anchored above 1.1550, and we expect consolidation between 1.1550 and 1.1720 this week.

GBP: Sterling Steadies After Selloff, All Eyes on PMI
After reaching a July high of 1.3750, GBP/USD fell sharply to 1.3364 last week before recovering into the 1.34s. This aligns with expectations for a temporary rebound following heavy selling. The RSI indicator has turned higher again, suggesting the downward momentum is fading, and a period of consolidation is underway.

Further gains are possible, but markets remain cautious and may sell into rallies. The 1.3364 level is a key support—tested repeatedly since April and acting as a pivot between strength and weakness.

The selloff in GBP/USD was driven largely by rising expectations for multiple BoE rate cuts amid signs of economic cooling. At its peak, the market priced in three more cuts for 2024, but stronger-than-expected inflation and wage data last week cast doubt on that scenario. Two cuts now look more realistic, which should support sterling at current levels.

Traders will also watch Thursday’s UK Composite PMI. Last month’s reading of 52.0 (up from 50.3) was the strongest since September and pointed to rising private sector activity. A similar result this week could further steady the Pound.

With the US calendar light, attention may briefly turn to global trade developments ahead of the August 1 deadline set by Trump. But for now, the dollar appears less sensitive to trade headlines, limiting the scope for further GBP/USD upside from this angle.

*All rates shown are indicative of interbank rates and should only be used for indication purposes only. It is important to note that foreign exchange rates fluctuate and that rates may vary depending on the amount and the base currency that is purchased or sold. Rates are correct as of 8:00am UK time. CentralFX are not responsible for the rates shown.